11/05/2025
Brazil’s Superior Court of Justice (STJ) is currently reviewing a tax controversy with potential impact across several industries. The case, listed as Theme 1,373, will decide whether companies may include a portion of Brazil’s federal excise tax – known as IPI – in the amount used to calculate PIS and COFINS tax credits, two federal contributions levied on gross revenue that allow taxpayers to offset certain costs under a “non-cumulative” regime, somewhat similar to VAT input credits in other jurisdictions.
In practical terms, when a business buys goods for resale, it often pays IPI as part of the product’s price. In some cases, that IPI cannot be recovered or offset later, becoming a permanent cost to the buyer. The question before the Court is whether that non-recoverable portion of IPI – already embedded in the purchase price – should also entitle the buyer to claim credits under the non-cumulative system of PIS and COFINS.
The Brazilian tax authorities argue that it should not, viewing IPI as an external cost outside the credit mechanism. Taxpayers, however, contend that excluding it results in double taxation, since the tax burden remains embedded in the final price without any form of recovery – contrary to the principle of non-cumulatively.
The STJ’s ruling will be binding on lower courts and could have significant financial implications for companies subject to PIS and COFINS. Although the case has been suspended after a request for further review, it may resume at any time.
Given the potential impact, companies are encouraged to file their court claims as soon as possible to ensure their right to benefit from any favorable decision that may result from the STJ’s ruling.
Our Tax Team remains available to discuss the implications of this case and to assist companies in assessing strategic actions related to STJ Theme 1,373.
Authored by: Tiago Zonta Guerreiro and Lívia Mauerberg Muscari
